Challenges for the second homes market and a likely rise in staycations
Property4Media’s latest Property Industry Press Conference, held on Tuesday last week, was an excellent and slick affair with some of the property market’s foremost experts acting as panellists. Moderated by Graham Norwood, Estate Agent Today and Letting Agent Today editor, the experts on the panel discussed the impact of the coronavirus epidemic on all sectors of the property market in a 90-minute Zoom session.
There was comment on everything from overseas buyers and construction to residential property and the economy, while each of the five experts – Liam Bailey, head of global research at Knight Frank, Camilla Dell, managing partner and founder of Black Brick Property Solutions, Sven Odia, chief executive at Engel & Völkers, Paula Higgins, chief executive of the HomeOwners Alliance, and Richard Donnell, director of research and insight at Zoopla – offered their own predictions on the market’s possible routes to recovery.
At the end, a Q&A session was held in which the panel were asked: how will the second homes market bounce back, both domestically and overseas, if travel is restricted and social distancing remains in place for at least the rest of the year?
“Clearly in Prime Central London a lot of the second home market is for overseas buyers,” Camilla Dell said. “As good as technology is, the reality is very, very few buyers will bite the bullet and buy a property they haven’t physically been able to see. So, I think that’ll put a real drag on the level of transactions happening in the second homes market.”
Another thing to be mindful of, she added, is the introduction of another levy – the extra 2% stamp duty for overseas buyers – which is coming into effect in April next year.
“At first it was thought there’d be this stampede, this big rush, of transactions, trying to take place before that date. But it’ll be difficult for those transactions to happen if overseas buyers can’t get here,” she commented.
“I also think it'll be difficult for transactions to happen while the pricing gap between buyers and sellers remains so wide. I certainly don’t see the PCL market being immune from price falls.”
She concluded: “We have to wait and see what happens, but absolutely the second homes market in London, and any development geared towards the overseas market, are going to be severely hampered while these travel restrictions are in place.”
Liam Bailey said it was clear that there would be some challenges in the UK and Europe, with a possible change in mentality from second home investors.
“Do people start to think about homes in locations they can reach by car and train rather than places they can fly to? Will there be a change in the south of France second home market, for example? Will it become more domestic? Will it become about locations where people can drive to? Will the UK market become weaker as a result?”
He said there will probably be shifts over the next 1-2 years in the second homes and overseas markets as a result.
“The other bigger story on second homes is on the education side,” he added. “It’s too early to tell, but universities could be impacted by the restrictions. Will we see as many Chinese students in the UK as we've seen in recent years, for example? If there's a decline, does that have an impact on student investors? Are student blocks recycled into the residential market? How do you then repurpose these?”
Sven Odia agreed that the holiday home market will change as a result of Covid-19. “Local holiday places will become more popular,” he said. “Second home customers are looking for places they can reach by car. This is something we are seeing a lot of, with a lot of demand in Germany for the North and Baltic Sea. We have seen a big rise in enquiries for people that'd like to spend their summer holidays in a place they can reach by car. I think this is a trend we will see, especially this year.”
You can watch the full webinar here.
Digitalisation will become a priority
In a wide-ranging webinar with a number of leading venture capitalists, titled ‘Urban life innovations after the lockdown: Top VCs on the cities of tomorrow’, much of the focus was on real estate and PropTech.
The webinar, led by startup mentor Tzvete Doncheva, discussed the main trends to watch out for in PropTech as we slowly ease out of the lockdown. Roelof Opperman, managing director at FifthWall, a venture capital firm focused exclusively on real estate technology, said that less access control, HVAC and filtering systems are some of the trends likely in new developments, while robotic cleaning and platforms facilitating excellent communication between landlords and tenants (on a remote basis) will also thrive in the new normal.
“For every real estate player, I think digitalisation went from priority 4/5 to priority number 1. The challenge a little bit is willingness to spend,” he said. “Overall, we will see 5-10 years’ worth of progress in certain areas in real estate tech and innovation in the next 6-12 months because of all that is happening in the space and how hard it has been hit. And in addition to this, the ‘forced experiment’ of working from home. It’s not about coronavirus changing anything but it accelerates everything.”
Another panellist highlighted the resilience of residential real estate in comparison to mobility and transportation - two sectors where a lot of tech companies have seen revenues drop dramatically, in some cases to near zero.
The panel also discussed how even market leaders such as Airbnb have been badly hit. They said that the big players are likely to be the ones to come out as winners, thanks to liquidity and past reputation – with people gravitating towards what they perceive as quality companies.
Additionally, the panel said that Airbnb’s balance sheet will enable it to weather a storm, not only for 12-24 months, but likely for indefinite periods of time. It was also noted that market leaders will be able to make opportunistic acquisitions of rival companies at cheaper valuations.
From an urban regeneration point of view, the panel insisted that collaboration between the public and private sectors is essential for the advance of smart city innovations and helping to develop the future resilience of cities against potential future threats.
Jess Williamson, PropTech strategist at the Ministry of Housing, Communities and Local Government, also joined the webinar to ask the panel which policy or innovation they’d implement if they were given a magic wand.
Opperman said the amount of power the councils have is a challenge for property developers, with the extensive bureaucracy in place in the UK holding back a lot of building.
The panel also agreed that, as we are developing the cities of the future, we should ensure they are inclusive – constructed from and for the entire population they are to serve. At both a funder and founder level.